Proactive disengagement: where to next for the ALC and Groote Eylandt?

 

I conjure you by that which you profess—

Howe’er you come to know it—answer me.

Though you untie the winds and let them fight…

… Even till destruction sicken,

answer me to what I ask you.

Macbeth Act four, Scene one.

 

Three weeks ago, on 16 October, the NIAA and NACC visited Groote and according to media reports met with the Anindilyakwa Land Council (ALC). Following the visit, the ALC board decided to dismiss their longstanding CEO, Mark Hewitt (link here). This follows an ABC news article on 10 July (link here) which quoted a spokesman for the NACC as confirming that it had received a referral from the NIAA and was assessing the referral. It appears (but is not certain) that the NIAA referral followed the May Senate Estimates hearings where Senator David Pocock questioned the ALC CEO about his dual roles as ALC CEO and as a Director of Winchelsea Mining, and summed up by commenting that Mr Hewitt’s dual roles were a "pretty egregious conflict of interest". According to the 10 July ABC news article, the Estimates Committee was advised that some $16m in royalty [equivalents] were directed to supporting the proposed Winchelsea mine.

Following the CEO’s dismissal, there appears to have been a conspiracy of silence from all involved. The ALC website has expunged all mention of Mr Hewitt but provides no explanation for the Board’s decision. The NACC continues its policy of complete silence until the results of its investigations are published. Minister Malarndirri McCarthy appears to have issued no media statement apart from her comments to the ABC (link here):

"I received a letter from the ALC chair informing me that at its meeting on October 16, the ALC board resolved to terminate the employment of the ALC CEO," Senator McCarthy said in a statement.

"Without the trust of the Anindilyakwa people and other key stakeholders, the ALC cannot properly achieve its mission of serving and advocating for the interests of the Anindilyakwa people."

All we can take from this is that the ALC Board lost trust in the CEO, but on what basis? The question is important because it goes to the nature of the issues that were of concern to the NACC and perhaps NIAA, and thus to the steps that need to be taken to remedy those issues.

Ever since the ANAO report into the ALC was published on 31 May 2023, the Government, Indigenous Australians Ministers Burney and subsequently McCarthy, and the NIAA have sought to downplay the issues which the ANAO report raised (for example by always focusing on the recommendations of the ANAO report rather than the myriad critical findings embedded throughout the report). They have also sought to slow down any proactive engagement, and thus avoid taking action to ensure the ALC was fulfilling its statutory obligations. In doing so, the Government has allowed the ALC, heavily influenced by its former CEO, to continue to pursue policies which are demonstrably at odds with normal standards of accountability, and which inevitably disadvantage the land council’s constituency, the traditional owners of the Groote archipelago.

To facilitate this proactive disengagement, the Government has adopted a strategy of intentional non-transparency. When interrogated, it invariably resorted to obfuscation, opacity and has hidden behind justifications which do not stack up under close scrutiny.

By deliberately not saying anything except when it has no choice, it has sought to minimise media attention by starving the issue of oxygen notwithstanding the fact that every time an ALC rock is turned over, a scorpion emerges. It has deliberately ignored the multiple concerns raised by numerous individuals including the 235 signatories to the Parliamentary petition tabled in February 2024, the issues raised in the SMH by Nick McKenzie and in the Saturday Paper by Ben Abbatangelo & Rachel Hoffman, and by me in two detailed letters to the ministers. This strategy has only worked because the Opposition has similarly adopted a studied position of policy insouciance. The Opposition Shadow Minister, Senator Jacinta Price has simultaneously argued for greater accountability of the land councils, unsuccessfully moving to establish a parliamentary inquiry into land council accountability, but failing to pursue in any substantive way the egregious issues that have emerged at the ALC (link here).

To date, the Minister appears to be continuing with her strategy of proactive disengagement. Meanwhile, while the NACC is focussed on determining whether there has been corrupt conduct by any individuals (inevitably a highly legalistic and thus narrowly focussed exercise), the potential for significant and ongoing financial losses and/or financial harm to the traditional owners on Groote remains unaddressed. These are two separate issues, and while they might overlap, it is unacceptable in my view for the Minister and NIAA to use the NACC investigation as the reason for doing nothing to mitigate the likely financial harms arising from the convoluted lattice-work of conflicts of interest that the ANAO uncovered in May 2023. Where is the public interest in waiting?  

Of course, the Government might argue that it set up the ‘independent review’ undertaken by BellChambersBarrett. This was sheer diversion to cover up inactivity. Ministers and the NIAA persisted in claiming the review was ‘independent’ notwithstanding that its recommendations were negotiated with and approved by the ALC (and implicitly its CEO Mr Hewitt who is now implicitly not trusted by the ALC and presumably the NIAA), notwithstanding that’s its drafts were commented upon and thus influenced by the NIAA Integrity Unit (and by implication the Minister), and importantly, notwithstanding that its terms of reference were limited to the implementation of the narrowly framed ANAO recommendations, and did not canvass broader or more recent issues. And of course, the ANAO report was itself limited by the ANAO’s remit to the operations of the ALC per se, whereas the complex flows of royalty distribution finance extend beyond the ALC to at least 12 corporations established under the CATSI Act, and over which the ALC exerted considerable influence if not actual control, thereby bypassing the intent of the Land rights Act to place individual distributions and investment decisions outside the purview of the land councils. The CATSI legislation itself falls under the Minister’s responsibilities.

Taking the commentary above as context, I propose to make some high-level observations on likely future developments and the necessary next steps in relation to the ALC.

The first set of observations relate to the case for undertaking a truly independent and transparent forensic audit of the ALC’s distribution of royalties and royalty equivalents. The ALC has leveraged these processes to allocate substantial (but as yet unquantified) financial resources to (a) retail outlets which do not appear to be independent of the ALC and its staff, and which may be shifting significant amounts of money to private individuals; (b) to request the Anindilyakwa Mining Trust (AMT) to transfer $41m to ARAC, a CATSI corporation which appears to have been effectively controlled by the ALC, but whose financial statements do not record the receipt of the payment which the AMT made; and (c) to effectively subsidising the infrastructure and other associated investments necessary to establish the Winchelsea mine which was / is effectively controlled by private investors and the former Chair and former CEO of the ALC (it is not clear if the Directors Winchelsea Mining have changed since the death of the former Chair and the dismissal of the ALC CEO; if they haven’t, then this in itself is a problem). The import of this subsidisation is in effect to grant funds to the interests which control Winchelsea Mining; yet analysis of the ALC’s own submission to the EIS suggests that the proposed mine will not be commercially viable (link here).

Even were these alleged financial misallocations to be found to involve corrupt conduct by the NACC, it would not fix the problem. What is required is a forensic audit to understand where the funds have been allocated and on what basis as the precursor to taking action to methodically unwind the arrangements that have been established to facilitate the misallocations. A forensic audit is thus the essential first step towards both addressing the conflict of interest and other problematic issues that have been allowed to develop within the ALC and to understanding whether it will be possible to recoup any misallocated funds. Moreover, delays will inevitably lead to an increase in the quantum of funds at risk of misallocation.

Perhaps more importantly, a forensic audit is an essential step in redesigning the ALC’s strategic financial strategy for the medium-term future given that the South32 mine is scheduled to close sometime in the early 2030s, with the almost immediate cessation of what is a significant financial flow to the Groote community. The sheer magnitude of these flows — which emanate from Commonwealth appropriations — to what is a relatively small population, which as has been previously pointed out (link here and link here) is paradoxically suffering from extraordinary levels of disadvantage, suggests that the Commonwealth itself has a responsibility to put in place a transition strategy of some kind. Again, the first step in doing so would be to understand just where the royalty and royalty equivalent financial flows have been allocated. It should not need to be said, but I will repeat it: the mere undertaking of a forensic audit is essentially a core regulatory oversight task, and it will not inevitably and adversely impact any ongoing investigations. Indeed, the reverse is more likely to be the case: it is likely to assist the investigation of potential legislative and accountability breaches, and it is possible that new lines of investigation in relation to corruption or criminal behaviours will emerge.

The second observation relates to the potential consequences of the current royalty distribution arrangements on Groote unravelling. There is more at stake here than an issue of whether an individual or group of individuals associated with the ALC have engaged in criminal activities or corrupt conduct. Notwithstanding the rhetorical hype that is often promulgated, the population on Groote are among the most disadvantaged citizens in Australia (link here). The reasons are complex and are not merely a matter of access to income. What is clear however is that the complexity and artificiality of the current financial arrangements on Groote are such as to exacerbate the risks of seriously negative social and cultural impacts from an erratic and haphazard unwinding of the current royalty distribution arrangements. The possibility of violence cannot be discounted. The implementation of any reform process will need to be managed. This is a task that will inevitably require external support. As a coda to this observation, I should emphasise that the risks of an unmanaged unwinding of current financial arrangements are higher if the Commonwealth chooses to remain inactive and disengaged. In my view, the Commonwealth now has no choice but to engage with the complexity its lack of regulatory oversight has unleashed (see below).

The third set of observations relates to the responsibilities of the Minister (and her predecessors) and NIAA to oversight the operations of statutory corporations in her portfolio. The scale and breadth of apparent maladministration; the quantum of the funds that may have been misallocated; the complexity of the financial arrangements involved; the convergence of public investment and private commercial interests, the sensitivity of the social, environmental and economic issues involved, and the extraordinary way in which much of this has developed and taken place in plain view indicates that there has been an extraordinary and substantial regulatory failure by the Commonwealth over a period going back to shortly after the former CEO Mr Hewitt was recruited. To provide just one example, the advice he gave to a previous Estimates Committee Hearing that he had a conversation with former Minister Scullion where he advised him of his dual roles on the ALC and Winchelsea Mining and assured him that there were arrangements in place to manage the conflict is (if true) an extraordinary revelation. Mr Hewitt claimed the subsequent Minister, Mr Wyatt, was also advised of the arrangement. These conversations in themselves appear to be significant watersheds in the development of the current royalty administration crisis, and yet appear to have elicited not one iota of concern within the Ministers’ Offices, nor NIAA (assuming of course that they knew of it; if they didn’t, what did NIAA do when they did become aware of the conflicted roles?).

Fourth, and finally, I make the observation that the current policy of proactive disengagement has meant that there is absolutely no information in the public domain regarding the current state of management of a key statutory corporation within the Minister’s portfolio. There are numerous legitimate questions that remain unasked and thus unanswered. To take some at random: what is the status of Ms Liu, Mr Hewitt’s spouse and a former employee of the ALC, who is /was actively engaged in the Royalty Shoppa scheme, in the ALC Royalty Management Unit (and thus a range of associated CATSI corporations), and in Winchelsea Mining? What is the status of the Chair of the ALC Audit Committee? How is it that the Audit Committee failed comprehensively over many years to identify and recommend the necessary changes to prevent the crisis that has emerged? For that matter, where was the NAIA Audit and Risk Committee in this whole process? Does the minister see these lapses as a problem and if so does she intend to do anything about it?  What is the current status of the proposal for a mine on Winchelsea Island?  Who are the Indigenous members of the Winchelsea Board following the dismissal of Mr Hewitt and death of the former Chair? Why did AAAC, the corporation which owns 70 percent of Winchelsea shares not have a single Director on the Winchelsea Mining Board? Has that been remedied recently?

More fundamentally, why has the current Government pursued a deliberate policy of proactive disengagement in relation to the operations of the ALC? How can the public and the traditional owners of Groote be reassured that the Government itself is not complicit in some way in what has transpired here?

The ALC and its associated recipient CATSI corporations are in a state of crisis. A crisis that no one wants to acknowledge, let alone seeks to fix. An apt metaphor would be a commercial corporation operating while insolvent. The risk is that it will seek to trade its way out of its financial crisis, and in the process, go bankrupt with even greater losses. The solution is for the shareholders to appoint insolvency specialists who can make an independent assessment and address the underlying issues.

In the present case, it is the Minister to whom this responsibility falls. To date, she has given absolutely no indication that she is cognisant of the risks or prepared to take the necessary action. She should immediately take action to appoint a highly experienced independent administrator to the ALC with the authority to oversee an independent forensic audit and to develop a pathway out of the current crisis. This process will require full transparency to minimise the risks of societal conflict on Groote, to ensure that those responsibility for getting the ALC into its current morass are held accountable, and importantly to maximise the chances that those who will be found to have suffered financial losses or disadvantage are recompensed. This responsibility goes beyond one individual and the possibility at some point in the future of a limited finding of corruption or misfeasance in public office.  And it goes beyond the ALC and its employees.

 

5 November 2024

 

Groote Eylandt: the ALC ‘Royalty Shoppa’ Prepaid Card

                                                 In the corrupted currents of this world,

Offense's gilded hand may shove by justice,  

And oft 'tis seen the wicked prize itself

Buys out the law…

Hamlet Act three, Scene three

 

One of the intriguing initiatives of the ALC has been the establishment of the Royalty Shoppa Prepaid Card. It is voluntary and may have benefits for users. But closer examination reveals a somewhat murkier and perhaps insidious side to this financial product.

There are very significant royalty flows into Groote. In addition to negotiated royalties allocated to the Anindilyakwa Mining Trust (link here), the ALC distributes so called royalty equivalents allocated from Commonwealth Consolidated Revenue to the ALC in accordance with the provisions of section 64(3) of the Aboriginal Land Rights (Northern Territory) Act 1976 (ALRA).

The adult Aboriginal  population of Groote Eylandt is around 1100 people (link here). According to the Rents and Royalties Snapshot available on the ALC website, over five years between 2019 and 2023, the ALC distributed $361m in section 64(3) payments (link here). This translates to a per capita payment of $328k, though the allocation is much more diffuse, and direct payments to individuals are much less. The snapshot suggests that some $87m went to community support (which appears to be the category used for payments to individuals) over the five years. This equates to some $81k per capita over the five years. Clearly there is a significant financial pool available for private consumption. Note the above calculations do not take into account traditional owners residing outside of Groote Eylandt.

The next largest allocation category, labelled economic development, totals $83m over the five years; this includes, inter alia, a range of infrastructure developments designed in large measure to underpin the proposed Winchelsea mine, and whose beneficial impact will be heavily influenced by the success of failure of that enterprise. But that’s another story. Education, health and housing initiatives received a combined total of $100m over the five years, which amounts to less than thirty percent of the funds available for distribution. While clearly beneficial, these sectors are also crucial determinants of economic prosperity and deserve, in my view, a higher priority.

Before discussing the detail of the Royalty Shoppa Card, it is worth noting that one of the alternative approaches which might have been pursued would have been the development of a financial literacy support function by one of the corporations on Groote, complemented with assistance to individuals in providing access to debit and credit card facilities issued by mainstream banks. It is particularly notable that while the royalty shoppa incentivizes immediate consumption, the land council appears to have no offsetting emphasis on the benefits of personal savings and the strategies available to facilitate and leverage personal savings plans.

It is unclear why the ‘shoppa card’ approach was chosen by the ALC, but at least one of the potential reasons is that it encourages cardholders to spend their funds on Groote at locally owned stores (noting that the ALC has approved the use of the card in a wider range of stores including in Darwin, Katherine and Cairns). I have no specific knowledge of the ownership of the retail facilities on Groote. The recent Saturday Paper article (link here) suggested that significant amounts of the funds deposited on the shoppa cards were spent in the Anindilyakwa Shoppa Warehouse. The article quoted a community member making critical comments about the quality of the goods being sold. It is unclear if the royalty shoppa warehouse on Groote is owned or operated by the ALC or an associated corporation though the use of the name suggests that it is. If it is there may be a conflict of interest for the ALC (see below).

Apart from the policy issues generally, the issues of concern to me are more technical in nature and go to the legality of the complex financial flows administered by the ALC and general compliance with the legislative scheme which governs the operation of land councils. As I have mentioned previously, the ALC is required to distribute s64(3) payments from the ABA to Aboriginal Corporations established under the CATSI Act (link here), which is administered by the Office of the Registrar of Aboriginal Corporations (ORIC). These corporations are thus sometimes referred to as ‘ORICs’ including in some ALC publications. The intent of this provision was to place land councils at arm’s length from actual distributions or investments; an intention that has been subverted on Groote Eylandt.

There is no provision in the ALRA which provides for a land council to determine how a funded corporation shall utilise a distribution payment; the legislation merely refers to the funds being utilised for the benefit of the traditional owners. It is apparent however that the ALC exercises a high degree of influence (even control) over the expenditures of funded CATSI corporations, not least through the operations of the Royalty Development Unit (RDU), located within the ALC administration and based in Cairns. The RDU is funded by s.64(3) payments to the Anindilyakwa Royalties Aboriginal Corporation (ARAC) which pays the funds back to the ALC for the operating costs and salaries. While the ALRA legislation provides for a land council to assist corporations in receipt of royalties, and to charge fees, the wholesale funding of land council staff from royalty equivalents without acquittal of those costs in my view pushes beyond the acceptable limit. This arrangement potentially bypasses the legislated arrangements for administrative funding of the land councils which requires the Minister to approve the estimates for section 64(1) funds allocated for that purpose. This arguably undermines the separation of powers between funding allocations and ultimate expenditures which are implicit in the requirement for a land council to distribute 64(3) funds to independent corporations. We can see an instance of this in the arrangements for the royalty shoppa card.

The ALC webpage on Royalty Shoppa includes links to three technical documents related to the royalty shoppa card: a Financial Services Guide (FSG) (link here), a Target Market Determination (link here) and a Product Disclosure Statement (PDS) (link here). The following summary of the operation of the card is taken from these documents. Text bolded in square brackets is my commentary.

The shoppa card is issued by Indue (link here) (a Queensland based financial services firm) and is described as a ‘reloadable eftpos prepaid card’.  It allows the cardholder to make purchases at ‘ALC approved stores’. The ALC is an authorised representative of Indue, and is the distributor, manager and promoter of the prepaid shoppa card. In the FSG, the ALC states ‘We do this on behalf of the product issuer (Indue) and not as the agent of potential product users…’  [This raises the question how can the ALC protect the interests of cardholders vis a vis the card issuer if it is a representative of the card issuer?  Moreover, given that a key function of a land council, laid out in section 23(1), is ‘(b)  to protect the interests of traditional Aboriginal owners of, and other Aboriginals interested in, Aboriginal land in the area of the Land Council’ one might legitimately ask how is it that the ALC thinks it can enter into a contractual arrangement that is at odds with, and in effect seeks to contract out of, its statutory function?].

According to the PDS, the ALC loads the cards with royalty payments approved by the Anindilyakwa Royalties Aboriginal Corporation (ARAC). The ARAC Board approves the amounts and dates of any royalty payments. Up to fifty percent of the funds to be paid are available on the card for a period of about ten weeks until the ‘suspension date’, a date determined by the ALC. The suspension date is shortly before the date that the ARAC Board determines that royalty payments are to be distributed. Both dates are then published on the ALC website. In the period between the suspension date and the royalty payment date, any remaining funds are then unloaded by the ALC and deposited in cardholders normal bank accounts. [It is clear from this convoluted process that the ALC and ARAC are in effect operating as a functionally entwined entity, essentially under the control of the ALC via the RDU. The ALC is in effect subverting the section 35 requirement for payments to be made to an Aboriginal Corporation. It is also clear that by providing early access to payment distributions to those who sign up for the card, the arrangement creates an incentive for people to spend a significant portion of their payments in ALC approved stores].

The FSG provides the following information on how Indue is paid. It states: ‘There is no direct remuneration, commissions or other benefits received by ALC. Indue passes to us a portion of all interest that it earns from time to time on the funds held in respect of the available balance of the Prepaid Cards to…ARAC, a related entity of ALC. The dollar amount of the interest payable to ARAC is unascertainable as it depends on the usage of all the Prepaid Cards.’ [The percentage of interest earned by Indue that is paid back to ARAC is ascertainable, but is not revealed in the FSG].

The FSG also states: ‘Indue is paid from fees charged to ARAC and from interest that is earned on the funds held in respect of the available balance in the prepaid cards.’ [It is clear from this that cardholders do not earn interest on their card balances. The statement in para 16 of the PDS that ‘there are no fees or charges payable by you to Indue or ALC in relation to the use of your Prepaid Card’ while technically correct, appears misleading in the light of the fact that Indue accrues both the interest, and a fee paid from royalties that would otherwise be available to traditional owners].

[In acting as the representative of a commercial entity, the ALC appears to be engaging in commercial activities. It receives no fees, but ARAC does although it provides no service for that fee. ARAC also pays fees to Indue which logically must exceed the fees they receive in lieu of the ALC services. To the extent that ARAC is in effect a ‘controlled entity’ of the ALC, then the arrangements with Indue by the ALC would appear to breach section 23 (1) (ea) of ALRA which require that the ALC not incur any financial liability or receive any financial benefit in relation to its assistance to a corporation engaged in commercial activities].

Finally, the ALC website currently includes the following information under the Royalty Shoppa section of the site:

The newly appointed Anindilyakwa Board met recently to discuss the next round of funds to be distributed to the Traditional Owners of Groote Eylandt. The board passed resolution for a one-off assistant [sic] payment of $1,000 to be paid to all eligible Traditional Owner bank accounts on Wednesday 25th September 2024.

NO funds will be loaded to the Anindilyakwa Royalty Shoppa Card this month and NO royalty payment will be paid in December 2024.

This is not consistent with the statement in the PDS (quoted above) that it is ARAC which decides the date and amount of royalty payments to individuals (but is not technically a breach of the PDS as no funds are to be loaded onto the shoppa card). More importantly, nor is it consistent with the requirements of section 35 of the ALRA which requires the ALC to make payments to Aboriginal corporations (and not directly to individuals). Of course, it is likely that the RDU will finesse the financial transfers, and pass them through ARAC’s account, thus providing the appearance of compliance with the legislation. But the cat is out of the bag: the ALC is calling the shots and not ARAC. [This raises a further question for the Registrar of Aboriginal Corporations: if these payments do in fact pass through ARAC’s books, it will provide clear evidence that the Directors of ARAC are not managing the corporation’s financial affairs in accordance with their responsibilities as Directors, but are being directed by the ALC. In these circumstances, the Directors would either be negligently failing in their duty to provide managerial oversight of the corporation’s actions, or deliberately complicit in allowing the ALC to control the activities of the corporation. Either eventuality should induce the Registrar of Aboriginal Corporations to take appropriate action].

 

Conclusion

The ALC Royalty Shoppa Prepaid Card as currently designed appears to be inconsistent with the overarching legislative requirements governing the operations of land councils and the administration of royalty equivalent payments under section 64(3). It is unclear how much the operation of the card costs and how cost effective it is. There are a range of policy issues that do not appear to have been adequately thought through. There are clearly significant risks of unscrupulous behaviour, and in worst cases of fraud and/or corruption depending on the relationship between the ALC, ARAC, and the retailers. This is an issue which is beyond the scope of this post to assess and definitively comment upon. Key issues would include the cost effectiveness of the retail stores on Groote, their profit margins, product quality, and the relationship between these factors and the incentives embedded in the way the cards are administered by the ALC. In plain language, card holders are encouraged to seek to access their funds early, and thus to spend their available cash in a limited number of retail outlets which may not have the best range of goods in terms of quality or choice. The owners of those retail outlets, or the suppliers of goods to them may be making significant profits above what are normal retail margins. There are no indications that the ALC has any risk mitigation strategies in place to manage these risks.

What is particularly apparent is that there appears to have been a regulatory vacuum in terms of oversighting the operations of the ALC. The Registrar of Aboriginal Corporations does not appear to take a close interest in the interaction between the land council and the CATSI Act corporations that the Act stipulates should receive royalty payments. The NIAA does not appear to have taken any interest in the operation of a scheme that is clearly problematic in terms of its compliance with the relevant legislation. And successive federal ministers have adopted a hands-off approach to the operations of the land councils, notwithstanding that any deficiencies inevitably mean that potentially vulnerable Aboriginal people will bear the costs of poor policy decisions.

These administrative and regulatory shortcomings are more than a matter of concern; they represent a tragedy insofar as the life opportunities of many families are constrained and limited by deep-seated socio-economic disadvantage and poor housing, poor health and poor educational engagement. For further detail, see data point two in this earlier post: Dodge, Dip and Dive: eight data points on remote policy (link here). In these circumstances, it verges on incomprehensible that the land council (if judged by the priorities reflected in its royalty distributions) appears largely oblivious to their plight.

While the principles of self-determination are crucial, in matters as complex as the interaction of finite royalty distributions against ongoing and deep-seated deficits in basic physical and social infrastructure, it is essential that the Aboriginal decisionmakers have access to objective and professional advice, and importantly, that key advisers with extraordinary conflicts of interest are not the primary sources of such advice. These are matters that a proactive minister could address through more intensive engagement and communication on the ground, and through more intensive, and dare I say courageous, regulatory oversight.

The ALC website has a short and professionally scripted and filmed video promoting the royalty shoppa arrangements to residents on Groote (link here). I recommend readers take a quick look. The very first words uttered in the video are ‘The days of our people getting ripped off are over!’

 

22 September 2024

Imbroglio on Groote Eylandt: a high-level roadmap

                                                            I see, as in a map, the end of all.

Richard III, Act two, Scene four

 

Over the past 14 months, there has been a steady torrent of public complaints, reports and media analyses raising concerns related to the governance of the Anindilyakwa Land Council (ALC), and its then Chair and current CEO.

 

Given the complexity of the institutional environment, let alone the myriad problematic activities that have been aired, I thought it might be useful to try to lay out a very high level roadmap of how the oversight of the issues on Groote emerged, what is currently being done, and where it might go into the future. This post is not aiming for comprehensive detail, but rather aims to set out the context. For more detail, readers are referred to the reports listed below, along with the analysis of some eleven previous posts on this blog which can be accessed in the recent post, Eleven posts foretelling calamity and tribulation on Groote Eylandt (link here).

 

Key events

 

In May 2023, the ANAO issued a performance audit report (link here) into the operations of the Anindilyakwa Land Council, a Commonwealth statutory Corporation established under the Aboriginal Land Rights (Northern Territory) Act 1976 (ALRA). The content of the audit was highly critical of governance standards within the ALC, identifying numerous potential conflicts of interest involving the Chair, the CEO and his spouse, amongst numerous other issues of concern. The remit of the audit was limited to the ALC and not to the network of corporations in receipt of royalty equivalent payments, thus limiting the focus of the recommendations to the ALC’s operations. It is worth noting that the ALC and the NIAA would have been provided with a draft report in March or April 2024.

 

On February 2024, a petition signed by 235 residents of Groote Eylandt was tabled in the Federal Parliament raising a range of concerns regarding the operations of the ALC and in particular its CEO. In response, Minister Burney (who is responsible for the operation of the ALRA told a media outlet that she would ask the NIAA Integrity Unit to investigate the concerns raised. Five months later, that investigation (whose terms of reference were limited to the ANAO recommendations) has yet to be released.

 

On 11 May 2024, the SMH published an article (‘CEO’s plan for personal millions form Indigenous mine deal exposed’) by investigative reporter Nick McKenzie (link here) which revealed that in September / October 2023, the ALC CEO had sought approval from the AAAC (the formal owners of 70 percent equity in Winchelsea Mining Pty Ltd) to grant him and his wife (Ms Sophy Liu) a ten percent stake in Winchelsea Mining. Following concerns expressed by an ALC legal officer, and the provision of a second legal opinion, the CEO deferred finalising the transaction

 

On 7 June 2024, during a Senate Estimates hearing, Senator Pocock raised serious concerns with the ALC CEO regarding the negotiation of the terms of the mining agreement between the ALC and Winchelsea Mining. The ALC Chair and CEO had statutory responsibilities to protect the interests of the TOs on Groote Eylandt, yet they were also both the Chair and co-CEO of Winchelsea Mining where they had responsibilities to protect the interests of their shareholders. The terms of the Agreement are not in the public domain, however the ALC CEO claimed that he had briefed the then Minister Nigel Scullion, who had approved the agreement. None of this was made public at the time. At the same Estimates Committee Hearing, the NIAA Integrity Unit indicated that they had received a draft of the investigation and expected the report to be finalised by July.

 

In early July 2024, the Minister’s Office or the NIAA advised the media that the NIAA had referred allegations against either the CEO or the ALC to the National Anti-Corruption Commission (NACC). The Minister would have approved this referral. The referral likely pertains to the proposal to grant the CEO and his spouse a ten percent share in Winchelsea Mining. The NACC had already received a number of referrals related to the actions of the ALC and its CEO from private citizens prior to the NIAA referral; it is unclear if it intends to conduct an investigation, and the extent of its inquiries if such an investigation proceeds.

 

On 20 July 2024, freelance journalists Ben Abbatangelo and Rachel Hoffman published a detailed account in The Saturday Paper (link here) of numerous new allegations of problematic activities on Groote centred around the roles, activities and influence of the ALC CEO and the recently deceased Chair. Key revelations in this article include the following: the role of the ALC royalty development unit in implementing the development the Royalty Shoppa debit card which quarantined significant levels of funds to expenditures in the Royalty Shoppa Warehouse; the apparent inconsistencies in relation to advice to Minister Scullion in relation to cuts to the CEO’s salary to offset his salary from Winchelsea Mining and the actual salary paid by the ALC over subsequent years; allegations that action to mitigate and address conflicts of interest by the former Chair and the current CEO had not been implemented in relation to key ALC decisions; and that concerned TOs had complained to the Minister regarding lack of accountability for a substantial payment by the Anindilyakwa Mining Trust to the Anindilyakwa Royalties Aboriginal Corporation, but had not received a reply.

 

Ways of interpreting the current imbroglio

 

There are at least five legitimate ways to evaluate and assess the ongoing developments on Groote Eylandt, and their interaction with the accelerating momentum of accountability focussed investigation.

 

First, one might assess past, present and future developments through the narrow focus of whether or not there has been fraudulent or illegal behaviour by any of the actors involved in managing the ALC and its associated royalty distributions. Important as this is, I would argue that a focus solely on fraud and accountability is too narrow and will not address wider issues of fundamental importance to the wider community on Groote.

 

Second, one might assess the policy effectiveness of the ALC’s strategic vision and plan for the residents and TOs of the Groote archipelago. The ALC strategy as promulgated on its website is sophisticated and polished. I discussed in in some detail in my earlier post The proposed Winchelsea mine on Groote Eylandt: a strategic opportunity? (link here) where I concluded:

The high level aspirations articulated by the ALC have real merit. I support them if they can be afforded. The strategies being adopted are however deeply flawed, and in my view will likely lead to a disastrous financial meltdown on Groote at some point in the next five years. If this occurs, the socio-economic ramifications will entrench further disadvantage and possibly lead to the unravelling of social cohesion on the island.

I outlined the reasons for that conclusion in the following post (link here). That conclusion has not been refuted by the ALC or the NIAA. Time will tell.

 

If I am right, the current inaction by governments will mean that they share direct responsibility for the outcomes.

 

Third, one might assess the effectiveness of the current regulatory oversight of the activities on Groote since late 2018 when the ALC CEO wrote twice to Minister Scullion advising him of the proposals to establish Winchelsea Mining and purchase the mining tenements on Winchelsea Island. The ALC is a Commonwealth statutory corporation. Unlike private sector corporations, it is not regulated by ASIC and the ACCC, but by the provisions of the ALRA which is administered by the Minister for Indigenous Australians and the Public Governance, Performance and Accountability Act (2013) (PGPA Act) which is administered by the Minister for Finance.

 

See this flipchart for a listing of all PGPA Act entities (link here). Sections 25 to 29 of the PGPA Act impose the following duties on all officials: a duty of care and diligence • a duty to act in honesty, good faith and for a proper purpose • a duty in relation to use of position • a duty in relation to use of information • a duty to disclose interests.

 

Since 1976 when the ALRA was enacted, those two Ministers and their agencies have shared the bulk of the responsibility for regulatory oversight of the actions of the NT Land Councils, with the Indigenous Australians Minister in the lead. Some other accountability agencies have specific roles, for example, the ANAO which undertakes financial audits of NT land councils’ financial affairs and can undertake performance audits (such as the performance audit published in May 2023). The indigenous Australians Minister approves budget estimates for each land council and is required to approve various arrangements set out in the ALRA (eg mining agreements negotiated by a Land Council with a mining corporation).

 

Given this background, the inability of the NIAA at the Estimates Hearing of 7 June 2024 (link here: page 29) to satisfactorily respond to questions from Senator Pocock as to whether the Minister or the NIAA had been advised of Mr Hewitt’s potential conflicts of interest appeared to evoke a level of astonishment. In seeking to deflect the Senator’s apparent incredulity, the NIAA CEO explained that the ANAO Report was directed to the ALC itself. The statement and concomitant inference that the NIAA was not responsible for knowing these matters reflects a deep-seated hands-off approach that is not consistent with the statutory responsibilities of the Minister and her agency. 

 

I am not aware of any detailed analysis of the quality of the Ministerial and NIAA regulatory oversight in relation to Groote, yet the more egregious the situation being uncovered is ultimately found to be, the more we can be confident that it has been facilitated (either consciously or unconsciously) by regulatory failure. The key issue then becomes whether that regulatory failure is a one off, or systemic. Prima facie, the quality of regulatory oversight of the ALC over the past eight years appears to be seriously deficient. In my view, the NACC and the Parliament should make the assessment of this issue a primary focus on their ongoing oversight and investigations.

 

For any sceptics that question my assessment of the existence of regulatory failure, let me provide one personal anecdotal example. I wrote a considered and detailed letter to Minister Burney on 1 March 2024, copied to the Minister for Finance and the ANAO, attaching a detailed analysis of compliance with the legislative requirements for distribution of royalties and the evidence revealed in my own examination of the publicly available financial statements of the key recipient corporations. I framed my analysis as provisional and recommended a detailed forensic audit be commissioned. There are three possible acceptable answers to such a letter: one, I have considered your points and agree and am taking action; two, I have considered your points and disagree for the following reasons and am thus not taking action; three, I am considering the matters raised and will respond when I have reached a conclusion.

 

I received no acknowledgement or reply from the Minister for Finance nor from the ANAO. On 11 June (over three months later) I received a response from the NIAA CEO noting that a review into the implementation of the ANAO recommendations had been commissioned, and explicitly acknowledging that the scope of that review does not address the concerns I had raised. The CEO went on to state that it is worth noting that it is standard practice for the NIAA to refer matters to the appropriate authorities when there are identified concerns regarding the conduct of organisations or individuals that are better managed by those authorities. The letter did not indicate whether any matters had been referred to ‘appropriate authorities’.   Yet the matters I had raised related directly to the regulatory responsibilities of the NIAA and the Minister. I concluded that I had been advised, in the politest terms, to go jump in the lake.

 

Fourth, one might assess the developments on Groote in terms of their implications and consequences for macro-policy issues. These include issues such as the more general effectiveness of the policy and accountability oversight of the land councils in the NT, whether the operation of the ABA which includes funding of Land councils, distribution of royalty and royalty equivalent payments under ALRA;  wider issues related to whether mining related payments more generally are being managed effectively; whether it is time to review the operation of ALRA to assess whether it is still meeting its objectives; and whether the policy capabilities of the NIAA and other agencies (such as The Office of the Registrar of Aboriginal Corporations) have been hollowed out over the past decade leading to loss of corporate memory and policy capability.

 

Again, I am not aware of any considered research or writing, nor any reviews or parliamentary committee focus on these issues in the past decade. My recent post on the draft ANAO work program (link here) discusses some of these issues in more detail. My core point is that the imbroglio unfolding on Groote ought to be seen as an opportunity to proactively finetune and improve the broader institutional frameworks which play an important part in supporting the aspirations and interests of First Nations citizens in northern Australia.

 

Fifth and finally, one might assess the ongoing Groote imbroglio in terms of what it says about the state of our political system. Neither of the major parties appears to have covered themselves in glory so far, and the longer these issues remain unresolved, the greater the likelihood that trust in our political system and democracy will be further diminished. I have commented previously on the disenchantment of remote communities with the current state of politics in the NT (link here: data point three) and I have previously pointed to the deep-seated disinterest of both CLP and ALP Senators in pursuing these issues in the three Estimated Hearings since the ANAO report was tabled. The fact that the NT election is imminent is clearly a salient factor in both sides seeking to keep the lid on these issues.

 

My own take on this is to suggest that the dominance of the Executive over the Parliament is a fundamental issue that requires more critical analysis and attention. Notwithstanding the ubiquitous rhetoric about the importance of democracy, our major parties appear prepared to set aside the public interest (of citizens and voters) in favour of their own political self-interest. The lack of motivation and timely action to date in addressing and disentangling the complex imbroglio on Groote is in my view just one further example of this dynamic. The structural and systemic exclusion of Indigenous interests continues.

 

To sum up, the imbroglio on Groote is cascading out of control. Where it will land, and its wider ramifications, are as yet uncertain. The core argument of this post is that adopting an analytic lens focussed on identifying the existence or not of villains and villainy is crucially important. However, limiting our analytical lenses to this is both overly simplistic and short-sighted. The effectiveness of the ALCs broader strategic policies is also crucial, and so too is the quality of regulatory oversight and the fitness for purpose of broader Commonwealth (and Territory Government) policy objectives and frameworks. Finally, understanding the political drivers in play is also important, as is assessing the longer-term implications of the major political parties continuing to prioritise political self interest over the public interest.

 

 

 22 July 2024

Groote developments: NACC referral by NIAA

                                                Here in [Australia]

Where I have seen corruption boil and bubble

Till it o'errun the stew

Measure for Measure, Act five, Scene one

 

The ABC is reporting (link here) that the ALC CEO has been referred to the National Anti Corruption Commission (NACC) by the National Indigenous Australians Agency (NIAA).

 

The article quotes a spokesperson from the NACC as stating:

The Commission can confirm that it has received a referral from the NIAA. The Commission is assessing the referral, as it does with all referrals, and will not make further comment at this stage.

 

Notwithstanding the headline and various statements throughout the article, the focus and basis for the referral is not clear from the statements of the NACC and NIAA spokespersons quoted in the article.

 

In my view, the ABC article over simplifies the situation in a number of ways. It fails to critically examine the nature of the current NIAA review, and implicitly suggests that it is aimed at the issues related to the CEO’s relationship with Winchelsea. In fact, its terms of reference are much more limited, linked to assessing the state of progress in implementing the recommendations of the ANAO Audit of May 2023, which was itself focussed on the ALC, and not the operations of the various corporations which are directly linked to funding Winchelsea. It appears to accept the NIAA claim that the review is ‘independent’, whereas its remit is limited and the NIAA has admitted that it was provided with a draft on 6 June, almost five weeks ago. An independent review would not provide a draft.

 

Most importantly, the NIAA has failed to make clear in its evidence to the Estimates Committee, nor in its description of the terms of reference of the review, that the Commonwealth itself has previously provided significant funding towards logistical support for the proposed Winchelsea mine, and that former Ministers apparently waved through advice of the CEO’s conflicts of interest and approved the mining agreement that necessarily involved the then ALC Chair and the current CEO negotiating with themselves over the terms of the mining agreement. Given this background, not only is the notion of an independent review oversighted by NIAA a contradiction in terms, but it opens the possibility that the NACC investigation, if it proceeds, may well end up focussing as well on the actions of former Ministers and NIAA staff.

 

A second assertion in the ABC report that appears entirely unwarranted is that the ALC stands to receive millions of dollars in mining royalties from Winchelsea. Statements to this effect may well be circulating on Groote but the limited size of the Winchelsea deposit and the significant costs involved in standing up a new mine in a remote locations make the economic feasibility fo the deposit unlikely. I discussed this matter in detail in an earlier post (link here).

 

The bottom line then is that the issues in play are extraordinarily complex, and indeed are much more significant than whether or not any ALC officeholders or employees are benefitting inappropriately. Of course, if they are, they should be held to account, but the ABC would do well to invest some more investigative resources in coming to understand an issue which has been running now for over 14 months with almost zero attention from the ABC.

 

To be clear, it is significant that the NACC is now assessing whether to investigate issues related to the ALC and Winchelsea Mining, and the ABC has broken new ground in reporting this revelation.

 

The questions that now need to be asked of the Minister for Indigenous Australians include:

 

What in particular led her to instruct her agency to make such a referral, and when did this occur?

 

Why has it taken so long to finalise the so-called independent review given that she was reported in the media in February saying that she had asked the Integrity Unit in NIAA to undertake an investigation?

 

If there is an adequate basis for referring issues to the NACC, what action has been taken by the Minister to ensure that individuals involved are not in a position to cover their tracks in the meantime? For example, if the referral relates in any way to the ALC CEO or former Chair, why did she not request them to stand aside pending the resolution of the matters subject to the referral?

 

Given that there is an election due next month in the NT, can the Minister give an assurance that she has not been deliberately seeking to keep the lid on these issues until the election is over?

 

Can she provide an assurance that there have been no requests from the ALP Government in the NT to delay action on assessing these issues until after the election?

 

To sum up, in my view, the policy issues involved which have the potential to constrain and limit the future economic prosperity of the whole population on Groote are such as to demand a public statement by the Minister explaining what she knew, when she knew it, what action she took and why it has taken so long to get nowhere in particular. The ALC is, after all, a Commonwealth statutory corporation which exists within the portfolio of the Prime Minister and Cabinet.

The fact that we haven’t seen such a statement to date is to my mind a reflection of the extraordinary regression in our standards of governance generally, and reflects poorly both on the Government and the Parliament in general. At some point, the cauldron of shady dodginess on Groote is going to boil over. The only unanswered question is who will be scalded and how much mess will be left behind.

 

Regional governance on Groote: financial and governance risks

 

And blind oblivion swallowed cities up…

Troilus and Cressida Act three, Scene two.

There is no doubt that the Anindilyakwa Land Council (ALC) is at the apex of the complex organisational structure that underpins and shapes Anandilyakwa community life on Groote Eylandt. The ALC is not without its competitors: GEMCO the operator of one of the world’s largest manganese mines dominates the local economy (link here); the Commonwealth and NT governments are the source of significant funding for infrastructure and services across the Archipelago, but neither government has a substantial presence.

If we were to map the institutional framework on Groote utilising the economists definition: institutions are the systems and structures that  comprise  the ‘rules of the game’, then the key nodes in that map would be the NT’s mining legislation; the Commonwealth’s Aboriginal Land Rights (Northern Territory) Act 1976 (ALRA) which establishes the ALC and governs royalty and royalty equivalent distributions; the Commonwealth’s Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act) which provides incorporation status to the various corporations in receipt of royalty equivalent payments from the ALC; the NT Local Government Act; and of course the swathe of civil and criminal legislation that applies to all Australian citizens wherever they reside.

What sets Groote Eylandt apart from the rest of Australia is its remoteness; the existence of the mine and its concomitant economic, social and environmental implications; the existence of a synergistic swathe of economic, social and health challenges (link here); the ubiquity and strength of Anindilyakwa language and culture (link here); and the existence of a concentrated cohort of people suffering from or at risk of developing a neuro-degenerative disease known as Machado Joseph disease (link here).

In contrast to many remote communities, local government and its associated services is not a high-profile player on the Groote Eylandt archipelago. However, there are processes in place which may change that. This post is aimed at documenting these processes given the ongoing and perhaps expanding focus on local governance on Groote over the past year or so.

For a high-level summary of what is happening, it is difficult to go past the ‘Future Groote’ tab on the ALC website. The following text has been taken from that web page which links to detailed underlying documents:

Future Groote Strategic Plan: The purpose of the ALC 15-year Strategic Plan (2012 – 2027) is to allow the Anindilyakwa people to take the future into their own hands. It is a culmination of the thoughts, vision and articulation of the Anindilyakwa people (link here).

6 Local Decision Making Agreements: On 14 November 2018, the ALC and NT Government entered into a Local Decision Making Agreement (LDMA). Under the LDMA, the Anindilyakwa people of the Groote Archipelago now determine the service delivery models that work best for their communities and region (link here).

Anindilyakwa Treaty: The ALC sees the Local Decision Making agreement as a pre-curser to a treaty agreement. Under the Local Decision Making, the Northern Territory Government has agreed in principle to the creation of a new Anindilyakwa Local Government Council. The ALC sees this as an important step towards self-governance on the Groote Archipelago (link here).

One of the six Local Decision Making Agreements related to local government. In July 2023, the NTG and the ALC finalised a Local Government Implementation Plan, with the title: Groote archipelago local decision making agreement schedule 3.6 – Local Government Implementation Plan (link here).

The implementation plan provides for the existing East Arnhem Regional Council (EARC) to be split in two to allow the creation of a new Groote Archipelago Regional Council (GARC). 

The Minutes of the meeting of the Angurugu Regional Authority of 28 May 2024 (link here) confirm, in the report of the AERC CEO, that the planned de-amalgamation of the EARC to create the GARC is proceeding, and that NT officials have advised the EARC that GARC will be formally gazetted on 1 September, under the control of an appointed ‘Constituting Member’, and that elections will be held to elect Councillors on 26 October. The minutes discuss various administrative matters, including a planned phasing in of CARC service delivery, and arrangements for a cost sharing agreement with EARC over this transition period. The minutes also document concerns, arising from a Financial Assessment Report dated February 2022, that there would be a funding shortfall arising form the de-amalgamation, and canvasses various correspondence seeking commitments from the NT to fund this shortfall. The minutes not that the 2024 NT Budget allocated only $3m to fund the de-amalgamation and to support other local governments, whereas the shortfall totalled around $6m.

The minutes note that the EARC CEO had written to the NT Local Government Minister in April regarding this issue and was yet to receive a response. The EARC also wrote to the Commonwealth Minister for Indigenous Australians, Linda Burney expressing concern at the prospect that ALC may be directing royalty funds to meet the funding shortfalls from the NTG. IN this context, they also expressed concern regarding the media coverage of wide-ranging concerns related to the allocation of royalty funds on Groote. In a similar vein, the President of the Local Government Association of the NT, Kon Vatskalis  a former Minister in the Martin Labor Government) wrote to the NT Local Government Minister expressing concern that the ALC was involved in the proposed local government Council given that the Federal Minister had referred concerns to the NIAA Integrity Unit. The Minutes attached the relevant correspondence and press reports.

Finally the Minutes include (on page 33) the following text:

Current ALC Payment of $1.5 Million of Anindilyakwan Royalties

This deep concern on the appropriateness of payments, includes an ALC commitment to provide 1.5 million dollars in royalty derived money requested by the Anindilyakwa Land Council and approved by the Anindilyakwa Royalty Aboriginal Corporation (ARAC), that GARC confirmed has actually been paid in the last two to three weeks, when we met to assist planning on 10 March.  I asked a joint GARC/EARC/NT CM&C collaboration meeting on 8 May: “What is the $1.5 million is for.” The Northern Territory Government senior representative stated “that NTG is committed to provide necessary funds” and the Constituting Member stated “…it was based on the principle that it’s not to substitute for required NTG funds”.  The GARC Constituting Member went on to state that: “There’s no limitations on it. It’s for us to utilise as we see fit. But there is a view down the track that it may fund transitions of ALC businesses to the Council, but there’s no plans for that now. It was given by ARAC as a sign of support for the new Council. I can’t recall in detail. There is nothing that confines us to anything.” The GARC Transition Manager (Interim CEO) Brooke Darmanin then stated that: “It’s very much a gesture. It recognises that there will be far more a cost in creating the Council than even recognised in the FAR report (Financial Assessment Report)” There was no comment on the $1.5 million royalty funding by the NT senior representative after that.

 

Conclusion

The concern being expressed by the EARC CEO is that the funding from ARAC will mitigate against the provision of adequate funding by the NT Government to both AERC and GARC. While there appears to be nothing illegal in such a payment by ARAC, the inherent and admitted vagueness of the purpose of the funding, when combined with the risk that ARAC is effectively controlled by the ALC, raises the clear potential for the grant to be some sort of quid pro quo. At the very least, it establishes a relationship of dependency between the ALC/ARAC and the GARC.

While it is clearly in the interests of everyone on Groote Eylandt that the various corporate entities operating on Groote co-operate and coordinate, it is not in the interest of the Groote population, nor is it consistent with normal principles of good governance, for a local government entity charged with delivering services to be beholden to and in debt to more powerful interests. There is a reason that local governments in the NT are based on democratic elections. Governance failures are a recipe for inequitable service delivery into the future.

The concerns expressed by the EARC CEO are serious and deserve appropriate consideration —not blind oblivion — by both the NT Local Government Minister and the Commonwealth Minister.  Unfortunately, deliberate blindness is endemic in public policy in modern Australia.

 

 

 

 

 

“Don’t you worry about that”: a further Groote issues update

                        Cassius: Did Cicero say any thing? Casca: Ay, he spoke Greek. 

Cassius: To what effect? Casca: Nay, an I tell you that, I'll ne'er look you i' the face again; but those that understood him smiled at one another and shook their heads; but, for mine own part, it was Greek to me.

Julius Ceasar, Act one, Scene two.

Estimates: On 7 June 2024, the Finance and Public Administration Legislation Committee convened to examine the financial estimates in relation to Cross-Portfolio Indigenous matters (link here). Senator David Pocock directed some sustained questions to both the NIAA officials and to the Anindilyakwa Land Council (ALC) and its CEO Mark Hewitt. Both the NIAA and ALC appeared quite uncomfortable with the scrutiny.

On these issues, the key takeouts from my perspective were as follows:

The core issues pursued by Senator Pocock were (a) the conflict of interest that the ALC CEO, Mark Hewitt has by virtue of holding simultaneous positions as CEO of the ALC, as an unpaid Executive Director of Groote Holdings Aboriginal Corporation (which funds infrastructure associated with the proposed mine) and as the co-CEO of Winchelsea Mining; and (b) the degree of disclosure made in relation to the October 2023 proposal from Mr Hewitt to the Anindilyakwa Advancement Aboriginal Corporation (AAAC) which owns 70 percent of Winchelsea Mining for him to be gifted ten percent equity in Winchelsea Mining.

NIAA confirmed that following the media revelations in early 2024, the Integrity Group has commissioned an ‘independent’ review of the implementation of the May 2023 ANAO audit recommendations by an accounting firm based in Canberra, Bellchambers Barrett. What they haven’t done is commission a forensic audit of the tangled web of influence and money flows between the ALC, and several local corporations providing funding to Winchelsea Mining and towards logistics infrastructure for the proposed mine. It is unclear how independent the reviewer can be given its business model is focussed on providing consulting services to government, it provided a ‘draft report’ to the NIAA before Estimates, and the terms of reference are extremely narrow.

NIAA failed to answer Senator Pocock’s question on whether the Minister had been briefed on Mr Hewitt’s conflicts of interest dating back to his involvement on both sides of the negotiation of a mining lease to Winchelsea in 2020. While formal recusal arrangements were put in place, it is unclear how they could work in practice, and whether the recusal arrangements also applied to the then ALC Chair and to his wife who I understand is also an ALC Board member.

When asked about why the CEO had not stepped aside, the NIAA responded that this is a matter for the ALC Board. However, as I have documented on this blog previously, there is a risk that individuals associated with the ALC exercise significant control over ALC Directors by virtue of the existence of a discretionary mechanism to provide former Directors with generous financial benefits (see the discussion of the Anindilyakwa Leaders Future Fund Aboriginal Corporation (ALFFAC) in an earlier post (link here). This is a matter that should be of concern to the Minister and the NIAA given their regulatory oversight responsibilities for portfolio bodies such as the ALC.

When the ALC appeared before the committee, the new Chair, Ms  Cherelle Wurrawilya stated unequivocally that the ALC Board was aware of the recent media allegations and stated that ‘the ALC board completely supports the work of our CEO, Mr Mark Hewitt. He has been our CEO for 13 years and is working hard to deliver the future that we, the Anindilyakwa people, want for our community.’ There was no reference to the 235 signatories to the Petition tabled before the previous Estimates Hearing.

Senator Pocock then asked the ALC CEO to outline how he dealt with conflicts of interest. The answers revolved around leaving the ALC Board discussion while Winchelsea matters were discussed; and leaving the Directors meeting of Winchelsea while ALC matters were discussed. Apart from the fact that this ignores the possibility of matters being discussed beforehand with key Directors in both settings, he did not make clear how the other two key management personnel within Winchelsea resident on Groote, the ALC Chair and Mr  Hewitt’s wife who is also a part time ALC employee dealt with conflicts. If all three recused themselves in matters affecting AAC or the ALC or Groote interests generally, that would only leave the two Directors from AUS China International Mining Pty Ltd (who  only own 30 percent of the joint venture) making the decisions. That this would be the actual situation defies belief.

Nor did Mr Hewitt discuss the fact that while AAAC owns 70 percent of Winchelsea Mining, no AAAC Directors sit on the Winchelsea board. Instead, AAAC is ostensibly represented within Winchelsea by the (former) ALC Chair and two ALC staff (namely Mr Wurramarrba, Mr Hewitt, and Mr Hewitt’s spouse). A more likely alternative interpretation however is that it is the ALC that effectively controls AAAC and the ownership of the equity stake in Winchelsea (see the discussion of the Corporations Act definition of effective control in my previous posts: link here and link here).

Senator Pocock then pursued details in relation to the proposal put to the AAAC and Winchelsea by Mr Hewitt for Mr Hewitt and his spouse to obtain an equity position in Winchelsea (which would have diluted the AAAC holding). In particular he sought details of whether the Minister was informed. It appears that she was not, despite the fact that in the ALC response to the ANAO Audit makes clear that Mr Hewitt and/or the ALC declared potential conflicts to both Minister Scullion and Minister Wyatt at earlier decision points.  Senator Pocock also sought clarification on whether the ALC had been informed and approved the proposal (the answer here was that it had been discussed, but it appeared that there was no formal decision). Further information was to be provided on notice in relation to these matters.

At an earlier stage in the Hearing, ALP Senator Ghosh asked the NIAA a couple of (clearly pre-planned) questions regarding the functions of the Integrity Unit. The answer provided by the head of the NIAA Integrity Unit – see page 19 of the transcript -  outlined the Integrity Unit’s program of proactive intervention to ensure ubiquitous probity across he portfolio. The response was clearly designed to conjure the impression that all is under control:

we have been taking and building a far more proactive approach to the detection and management of noncompliance and fraud. As you would appreciate, it's a continually moving environment within which we're working, so we have been working to put more systems in place so that we can identify and address potential issues of noncompliance and fraud earlier in the piece. Certainly, indications from the matters that we're now dealing with are that is being more successful. We are getting involved earlier in circumstances and intervening before things do become an issue.

I was reminded of the famous quote of Jo Bjelke-Peterson: ‘don’t you worry about that’! Senator Ghosh then asked about the ALC and was advised that: 

The minister referred the media reports and concerns that were publicised earlier this year to my group for review, the objective being that we would review the information and then determine if referrals to other authorities were required. As a part of the process, I have commissioned an independent review of the land council's responses to the issues and recommendations that were raised in the ANAO report on governance. You might recall that a number of the issues raised in that ANAO report were the core of the media reports and concerns being raised. That independent review is currently underway. We expect to have a report for it finalised by the end of next month, July. It is well underway. As part of the review, I accompanied the independent reviewer to Groote Eylandt last week. I was there for three days. We met with management and the board members of ALC to gather more information as part of the review's work. It is ongoing. Once we have the report, we will see what it says.

Nothing to see here! It will be interesting to see if the Bellchambers Review finds a way to address the October 2023 proposal by Mr Hewitt for an equity share in the mine, a proposal which of course post-dates the ANAO recommendations, and thus falls outside the remit of the review.

These issues were brought into sharp relief in the following exchange (on page 39):

Senator DAVID POCOCK: But in a period of what you describe as instability, you sought to gain a shareholding and you didn't think that—it seems pretty significant—warranted disclosing. You mentioned that you disclosed conflicts of interest to Minister Scullion. You didn't think that required disclosure?

Mr Hewitt: It was an internal discussion. I simply asked the question to the board. If I were to step down as the land council CEO and focus on these large projects and optimise their success, what would be the normal standard for any other Australian in that situation?

Senator DAVID POCOCK: But you're not any other Australian. You're employed as the CEO. So I find this quite extraordinary. In hindsight, now that the legal advice was 'This is highly irregular; don't do it', do you accept that it should have been disclosed?

Mr Hewitt: I'm talking as the CEO of Winchelsea. So there are two sides to the discussion here—

Senator DAVID POCOCK: And you're on both sides.

Mr Hewitt: I manage that conflict.

Senator DAVID POCOCK: It sounds like you managed it by trying to get a shareholding, to which the legal advice was 'No, you can't do that.' But you didn't even feel the need to disclose that you were doing that.

 

Commentary

For the third consecutive Estimates hearing, the issues around the involvement of the ALC CEO (and implicitly the former ACL Chair) in the Winchelsea mine proposal have been the subject of close attention. While the issues raised most recently revolved around conflicts of interest, it is important to bear in mind what lies behind the existence of such conflicts: there are certainly risks of fraud, or of breaches of legislative provisions; there are risks of poor management and decision making, and of inequitable or unethical allocations to individuals. However, of most significance from my perspective, there are risks of poor strategic decisions built upon sub-optimal  strategic decisions arising from the existence of conflicts of interest. For example, as I have pointed out in previous posts, the ALC allocates around $60m per annum in accordance with section 64(3) of ALRA to traditional owner corporations. Taking into account the negotiated payments to the Anindilyakwa Mining Trust ( a separate entity unrelated to the ALC, but with some overlapping members) there is about a billion dollars a decade in mining related payments flowing to the Groote population. To the extent that the ALC is not exercising independent judgment on the best use of these allocations because key decisionmakers are conflicted, there is a risk of significant commercial losses and a failure to preserve a long term capital base.  This is why eliminating (and not merely managing) conflicts of interest is so important.

I wrote to the Minister on 1 March 2024 recommending to her that she take early action to address these types of risk. In particular, I recommended a forensic audit that went beyond the narrow remit of the ANAO audit, and encompassed the network of interlinked corporations funded by the ALC. I recommended a number of other actions which I considered essential while such an audit was underway. Last week (over three months later), I received a response from the NIAA CEO which acknowledged that the scope of the current review does not address all the concerns I raised, but assures me that it will provide ‘information on the progress made by the ALC to better manage governance arrangements…’ The NIAA’s CEO’s response also specifically noted that it is standard practice for the NIAA to refer matters to the appropriate Commonwealth or state and territory entities for assessment and action. Needless to say, the response does not engender much confidence that the NIAA and the Minister (who are responsible for regulatory oversight of the ALC and its role in distribution of substantial mining related payments) are adopting a proactive approach to getting on top of the issues that are clearly in play. It is now over a year since the ANAO review was published, and the NIAA would have had earlier access to the ANAO’s draft report.

It is also worth noting that the Estimates Committee appears to be failing in its overarching responsibility as a key accountability mechanism for public policy in the Indigenous portfolio domain. In contrast to Senator Pocock, neither the ALP nor the Opposition Senators on the Committee evinced much interest in understanding what is occurring on Groote nor in finding ways to address the substantial policy risks I have identified previously on this blog and summarised in this post.

It is beyond the time when the Senate should undertake a rigorous review of the operations of Estimates Committees, and consider serious reforms to ensure that discussions are much more focussed and targeted than at present. Sitting through hours of hearings reminds me more of an extended primary school ‘show and tell’ session than a serious attempt to ensure funded agencies are up to the mark. In my view, Senators should be obliged to identify issues in advance, even table core questions, and Committee’s should utilise something akin to a counsel assisting to raises the questions that require attention. Why is it that our parliamentary representatives feel no sense of obligation to seriously focus on the job they are elected to perform?

 

21 June 2024